Exit Planning Process: The Engagement Meeting

Fri, 03/17/2023 - 08:00

Written by: JDewing2

Exit Planning is an essential process for business owners who are looking to exit their business on their own terms. It involves a series of steps and discussions that help owners plan their exits and maximize the value of their businesses. 

In last week’s blog, we covered the ins and outs of the Discovery Meeting and what it means for you as the advisor and your business owner client. This week, we’ll review the Engagement Meeting.

The Engagement Meeting is a critical step in the Exit Planning Process. In this meeting, you will have the opportunity to convert your prospects into clients by discussing the goals of the business owner and how you can help them achieve those goals. 

What is the Engagement Meeting?

The Engagement Meeting provides business owners with a valuable opportunity to explore the steps necessary to enhance their business value and exit on their own terms. Throughout the meeting, it is essential to have a client-centric discussion, focusing on the owner’s goals and how you, as the advisor, can assist them in accomplishing these objectives. 

As the business advisor, your role is to help your client envision the process and outcome of the Exit Planning engagement for both themselves and their business. It is only after carefully reviewing their individual circumstances and recommended actions that you should address the matter of fees. 

Let’s look at the three meeting topics within the Engagement Meeting:

  1. Exit Plan design

The first topic of discussion in the Engagement Meeting is Exit Plan design. Business owners can get busy and may forget the details of a previous conversation, but utilizing the illustration created in the Discovery Meeting will help to keep the previous conversation top of mind with your prospect. 

The illustration will also help you to discuss potential plan designs and recommendations, the bird’s eye view of the path to exit, and provide suggestions for action along the path. Ultimately, you will show owners the many moving parts of Exit Planning, and that you have the experience to create and manage the clear action steps.

  1. Working with other advisors 

The second topic of discussion in the Engagement Meeting is communicating and collaborating with other advisors to spur owner engagement. Exit Planning is not intended for one advisor to tackle alone; it requires a team of advisors and experts to implement the recommendations that will guide your clients to a successful business exit. 

For many Exit Planning Advisors, they find that starting with the client’s existing advisors is a strong place to start. It is essential to eliminate any obstacles to the client's progress. This can be done by assessing team member gaps. These gaps tend to change over time as the process proceeds. Taking it one step at a time and adjusting the structure of the team as the engagement progresses will streamline meetings, and thus save time and money.

As BEI Member Eddie Drescher shares, “My job as the Exit Planning Advisor is to try to eliminate any impediments to them moving forward.  Their advisor teams are not usually complete before beginning the Exit Planning Process. It takes time to determine advisor team member gaps, and they usually evolve as the process plays out. I like to take it one step at a time and add/subtract advisor team members as the engagement progresses.” 

  1. Fees and the Engagement Agreement 

The final piece of discussion in the Engagement Meeting is your fee structure. You have spent the bulk of this meeting and the previous setting the stage for where you will bring value to the owner, their business, and the process ahead. 

Additionally, utilize your existing relationships with advisors in your network who will be part of the Advisor Team to explain to the business owner that you can streamline meetings and reduce time and cost, as they are already familiar with your process. 

While discussing pricing with your clients may be a challenging conversation, it is crucial to overcoming concerns regarding the cost of an Exit Planning engagement.

The Engagement Meeting is an essential step in the Exit Planning Process, and provides an opportunity for you to convert your prospects into Exit Planning clients. Through consistent communication, working with other advisors, discussing the Exit Plan design, and determining your fee structure, you will be able to help the business owner visualize what the process and outcome will be for their business. 

Remember, Exit Planning is a team effort, and it takes a team of advisors and exports to implement the recommendations that will take your clients to their ideal exit. In next week’s blog, we’ll dive deeper into pricing considerations when working with clients and strategies for addressing concerns related to the cost of Exit Planning. See you next week! 

Register for the 2023 BEI National Conference


Exit Planning Process: The Engagement Meeting

Valuable Business Owners Know the Value of Exit Planning

Fri, 12/22/2017 - 07:00

Written by: eswanson

In last week’s article, Exit Planning Advisor Sally Campos and business owner Miles Smith were talking about business continuity. They began this conversation after they had reached two major Exit Planning milestones:

  1. Sally had quantified the difference between Miles’s current resources and the resources he’d need for a financially independent exit (Step Two of The BEI Seven Step Exit Planning Process™).
  2. Miles realized that he could not sell his business for the cash he needed because his management team was incapable of running the business without him.

After achieving these two milestones, Sally asked Miles about a specific question in the Exit Planning Assessment Miles had filled out: “Will your family’s long-term financial needs be met if you die unexpectedly?” Miles flipped to that question and showed it to Sally.

Step Seven Assessment Image

“This was the hardest question for me to fill out,” Miles said.

“Why is that?” Sally asked.

“Because of course I want to make sure that my wife and kids are going to be OK if I die suddenly,” Miles said. “And I’ve done nothing about it.”

For the first time, Miles connected the dots:

  • Throughout his meetings with Sally, Miles came to understand that he was too valuable to his business to leave it on its own. He needed to change his role before a buyer would be interested in buying it.
  • Because his business could not attract top dollar from a buyer today, it also couldn’t provide his family with financial security if he died before he implemented his Exit Plan.

“The whole point of selling this business was to provide enough for my family and me,” Miles continued. “We’ve got to do something now.”

Sally smiled and nodded. “Estate planning is a crucial step in creating a successful Exit Plan,” she said. “Let’s talk about how we can make your business valuable without you so that you and your family are financially safe, no matter what happens.”

Miles and Sally provide a great example of why I believe that the best way to engage sole owners in business continuity and estate planning is to lead with lifetime Exit Planning. Until business owners understand how their roles affect the value of their businesses upon sale or transfer, they will treat estate and business continuity planning as tasks to do later, which usually means never.

Strike While the Planning Iron Is Hot

Sally’s reaction to Miles’s realization was to suggest that they create and execute a lifetime Exit Plan while concurrently working on his estate plan. She offered to introduce Miles to an estate planning attorney and a life insurance advisor, who were both experienced in helping business owners plug the financial resource gap created by an owner’s pre-business-exit death.

Successful business owners seldom think about the consequences their planned or unplanned exits will have on their businesses’ ability to continue without them. These consequences affect their families’ financial security. But once business owners face the stark reality that their roles in their businesses have a direct effect on their families’ financial well-being (typically, with the help of an Exit Planning Advisor), they act. The key for advisors is to link the theoretical topics of business continuity and estate planning to owners’ desires to protect and provide for their families. Once advisors link the two for owners, everyone can begin working on an Exit Plan that will act as a road map for the most important financial decision of owners’ lives.



Using Business Continuity to Overcome Planning Inertia

Mon, 12/18/2017 - 17:00

Written by: eswanson

For both business owners and advisors, the concept of business continuity is important. Business continuity is how a business survives and thrives after the owner dies, becomes incapacitated, or otherwise leaves the business unexpectedly.

For co-owned businesses, business continuity conversations almost always begin with Buy-Sell Agreements. Properly drafted Buy-Sell Agreements are a part of what makes business continuity successful for co-owned businesses when one owner dies or becomes incapacitated.

But what about owners of solely owned businesses? Does business continuity play any role in their successful Exit Plans? The answer, somewhat surprisingly, is a resounding yes.

I think it’s impossible for sole owners and their advisors to properly answer the question, “What will happen to your business if you don’t make it to your planned exit?,” unless they’ve worked together through Steps One and Two of The BEI Seven Step Exit Planning Process™. Only then will business owners and advisors understand how a sole owner’s death or incapacitation will negatively affect business continuity efforts.

Business Continuity for Sole Owners

The best way for sole business owners and their advisors to engage in business continuity planning is to begin with lifetime Exit Planning. In this series of articles, we have followed the efforts of Exit Planner Sally Campos to motivate Miles Smith, the sole owner of an environmental remediation business, to engage in Exit Planning. We’ve watched how identifying goals (Step One) and quantifying the business resources available to achieve those goals (in terms of his management team; Step Two) ignited Miles's commitment to begin Exit Planning now.

Let’s look at how Sally’s use of the Exit Planning Process exposed Miles to his business continuity problem, a problem he didn’t know existed before working with Sally on his lifetime exit wishes.

From Lifetime to After-Death Continuity Planning

Sally and Miles had made inroads in their Exit Planning discussion. Since they last met, they had managed to address several nagging issues standing between Miles and a successful Exit Plan:

  1. They determined that Miles’s management team could not run the business without him.
  2. Miles had articulated his desired departure date.
  3. Sally had assessed the resources Miles had available to reach his financial goal and those he’d need on his departure date to live the post-exit lifestyle he desired.
  4. With the help of Markus Kravchuk, a business valuator she had worked with for years, Sally found that there was a gap of approximately $3 million between what Miles had (in terms of business value) and what Miles needed. To put it mildly, $3 million was a big surprise to Miles.

“Miles, we know that the business can’t run without you,” Sally began. “You, the Advisor Team, and I are discussing several strategies to address this, but in the meantime, I have one more question: If the business can’t run without you, what happens if you get hit by a truck today?”

Miles didn’t miss a beat. “Then my business would die with me.” Before Sally could ask, he continued, “I know you’re going to ask me what I have done about that. And I also know you know my answer, ‘Nothing.’”

“Well, that’s not entirely true, Miles,” Sally said. “We might not be there yet, but we’ve started addressing your goals and figuring out how to make sure you have what you need when you leave. For sole owners, those are the first steps in creating a business continuity plan.”

The Steps that Sally walked Miles through in their first meetings and her work with her team to design a plan to ensure a successful exit from his business exposed all of the strengths and weaknesses of Miles’s business. In other words, this was a classic Exit Planning engagement.

Once Miles realized that he could not transfer his business today without him remaining at the helm, dealing with his premature death became a priority.

Skipping Steps?

Two essential elements of any Exit Plan, regardless of a sole or co-ownership, are business continuity and estate planning. You might assume that we tackle these two near the end of the planning process, since they are, after all, Steps Six and Seven.

However, I’ve learned that once business owners appreciate the size of the financial gap they must bridge to exit successfully during their lifetimes, their attention naturally and almost immediately turns to ensuring (and usually, insuring) that the same gap is filled should they die before they exit. Fortunately, The BEI Seven Step Exit Planning Process allows business owners and advisors to address issues however they see fit, once they’ve completed Steps One and Two.

What’s Next?

In the next article, we’ll continue our discussion of business continuity and estate planning from an Exit Planning perspective, because both provide additional, and perhaps surprising, opportunities for estate planning professionals and savvy business owners.